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Covid 'holds back' some service lines for Keywords Studios

By Josh White

Date: Tuesday 04 Aug 2020

Covid 'holds back' some service lines for Keywords Studios

(Sharecast News) - Video games technical and creative services provider Keywords Studios updated the market on its first-half trading on Tuesday, reporting that some of its service lines had been "held back" due to Covid-19 disruption, particularly in its testing and audio units.
The AIM-traded firm said despite that, however, it was expecting to report first-half revenues of around €173.5m (£156.83m), representing an increase of around 13% year-on-year.

On an organic basis, it said group revenues were expected to improve by about 8% year-on-year for the six months ended 30 June.

Adjusted EBITDA was expected to be approximately €30.8m, making for an increase of 19%, while adjusted profit before tax was anticipated to be around €21.7m, representing an increase of 18%.

Keywords put that "robust" performance down to the "resilience" of its business model, the benefits of its diversified service platform, and the continued strong demand for most of its services.

It said its service lines had performed well, given the operational and market disruption caused by Covid-19, including some rescheduling of the later stages of content production, which it was expecting to see unwind in the second half.

Since June, the company said it had been able to reopen most of its audio studios, and from July it was starting to operate some activities from its testing studios, although recently-extended unemployment support measures were constraining its ability to recruit at the entry level, particularly in its testing operations in the Americas.

The board said it was prioritising in-studio recruitment and training activities to mitigate some of those constraints, with the aim of meeting as much of the strong demand for its services as possible.

Keywords said its £100m placing in May was "strongly supported" by shareholders and new investors, and ensured it could continue to execute on its merger and acquisition strategy, while maintaining a strong balance sheet.

Since the placing, Keywords completed the acquisition of Unreal Engine development specialists Coconut Lizard, and its acquisition pipeline was continuing to build as it selectively engaged with a number of potential targets.

As at 30 June, the group had net cash of €101m, compared to €17.9m of net debt at the start of the period, and €100m undrawn on its committed revolving credit facility.

"We are pleased to report a robust performance in the first half. I am proud that our resilient and flexible platform enabled our clients to pursue their production schedules, with Keywordians continuing to show their passion to create, adapt and support our clients' great game content, despite the Covid-19 challenges," said chief executive officer Andrew Day.

"In-turn, our clients have increasingly looked to us for their outsourcing needs during this challenging time.

"Demand for video games content has accelerated during the pandemic which has positively expanded the addressable market for our clients."

Day said it was expecting to see continued strong demand for its services, given the industry's structural growth drivers, the continuing trend towards outsourcing, the launch of next-generation games consoles later in 2020, and the further development of new streaming platforms.

"Our successful placing of £100m in May allows the group to maintain a strong balance sheet whilst continuing to deliver against our well established and value accretive acquisition strategy.

"Through both this strategy and organic growth, the group is well placed to take a leading share of the increasingly outsourced video games services market.

"We fully expect to complete further acquisitions from the strong and attractive pipeline of opportunities that we are currently reviewing, over the months ahead."

Keywords said it was expecting to announce its half-year results for the six months ended 30 June on 17 September.

At 1546 BST, shares in Keywords Studios were up 0.1% at 1,994p.

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